"Bond King" Bill Gross may not have had a good year following over $40 billion in redemptions from his $250 billion Total Return Fund, but another aspirational Bond King, DoubleLine's Jeff Gundlach, had an even worse year on an relative basis, when his Total Return Bond Fund saw $6 billion in redemptions ending the year at $30.9 billion in AUM following seven consecutive months of withdrawals. So in his attempt to start the new year on better footing, here is his first webcast (as usual open to the public), titled "Let the Race Begin! 2014 Markets: Year of the Horse", in which as usual Jeff will discuss the economy, the markets and his outlook for the best investment strategiest of 2014. Let's hope that for bond fund manager, that 2014 is not just another "year of the donkey", as was the case in the past year which everyone managing duration would rather forget.
Following last week's surprising passage of the preliminary approval to extend emergency unemployment claims, i.e. emergency jobless claims, for 3 months, when six republicans sided with democrats and gave approval to the original $6.4 billion legislation, there was an expectation that up to 1.4 million Americans would get their benefits extended once again (despite the so-called recovery in the economy, and the job market, instead of just all time high S&P500). Moments ago such hopes were dashed, when a Senate plan to restore long-term jobless benefits hit a wall Tuesday after Republicans withdrew their support amid complaints over cost and other issues.
If we have learned anything since the global financial crisis peaked in 2008, it is that preventing another one is a tougher job than most people anticipated. Not only does effective crisis prevention require overhauling our financial institutions through creative application of the principles of good finance; it also requires that politicians and their constituents have a shared understanding of these principles. Today, unfortunately, such an understanding is missing. “Firefighting is more glamorous than fire prevention.” Just as most people are more interested in stories about fires than they are in the chemistry of fire retardants, they are more interested in stories about financial crashes than they are in the measures needed to prevent them. That is not a recipe for a happy ending.
Following yesterday's worst day in stocks in 4 months, something had to be done. Starting at yesterday's US close JPY was sold after defending USDJPY 103 and that - along with a slamdown in gold, silver, and VIX provided the admittedly low volume melt-up in stocks today. Trannies and NASDAQ made it back into the green year-to-date. The small beat in retail sales this morning trumped the relative hawkish tones from Fed speakers today as the best day for USDJPY since the taper provided enough magical carry juice to lift stocks by their most since the taper (and the NKY up 400 points) with JPY-ES correlation over 0.92 today. Treasuries bled higher in yield with the belly underperforming (to unch on the week) and 5s30s flattening 3bps. The USD was bid against all the majors with JPY's move the largest as CAD retraced its gains from yesterday to its weakest in over 4 years. Gold and silver were quadruple-whammied today with 4 legs down after daring to show strength yesterday. VIX floored out at 12% once again and leaked higher all afternoon with a late-day press to try and ignite more buying in stocks. In summary, stocks mirror-imaged yesterday's dump with a half-volume pump, that is all.
This should be good... just don't mention the bridge (and with any luck this won't last as long as the press conference)
*CHRISTIE SAYS MISTAKES WERE CLEARLY MADE
*CHRISTIE SAYS I AM ULTIMATELY RESPONSIBLE FOR ALL THAT HAPPENED
Fed's Fisher Says "Investors Have Beer Goggles From Liquidity", Joins Goldman In Stock Correction WarningSubmitted by Tyler Durden on 01/14/2014 14:40 -0400
"Continuing large-scale asset purchases risks placing us in an untenable position, both from the standpoint of unreasonably inflating the stock, bond and other tradable asset markets and from the perspective of complicating the future conduct of monetary policy," warns the admittedly-hawkish Dallas Fed head. Fisher goes on to confirm Peter Boockvar's "QE puts beer goggles on investors," analogy adding that while he is "not among those who think we are presently in a 'bubble' mode for stocks or bonds; he is reminded of William McChesney Martin comments - the longest-serving Fed chair - "markets for anything tradable overshoot and one must be prepared for adjustments that bring markets back to normal valuations."
The eye of the needle of pulling off a clean exit is narrow; the camel is already too fat. As soon as feasible, we should change tack. We should stop digging. I plan to cast my votes at FOMC meetings accordingly.
Tax burdens are so high that it might not be possible to pay off the high levels of indebtedness in most of the Western world. At least, that is the conclusion of a new IMF paper from Carmen Reinhart and Kenneth Rogoff - “The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point.” The 'not different this time' couple see two facts of life for Europe’s future: financial repression through higher inflation rates and taxes levied on savings and wealth.
Poor Uber: the limo company has had its share of tribulations in the US over the past month, being accused periodically of price gouging when it implemented surge pricing during times of peak demand and lack of alternatives (and a very confused consumer, who naturally has the option of not paying the surge price if they feel insulted by it). However, this is nothing compared to the treatment the company that is a manifestation of pure capitalism at its rawest received in socialist France yesterday. As Rudebaguette reported previously, a French taxi drivers strike turned ugly for none other than an Uber driver who was carrying Eventbrite CTO Renaud Visage & Kat Borlongan from the airport to Paris, when "he was attacked by multiple assailants, who allegedly, after smashing one window and slashing two tires (as seen in the photo), as well as defacing one side of the car with glue, attempted to enter the vehicle" That was just the beginning. Later Uber confirmed that no less than a dozen confirmed incidents in Paris & Lyon, including “flat tires, eggs, broken windows."
As global central bankers appear set on a game of inter-continental reach-around, the Japanese - printing press handle in hand - have taken the lead. For those wondering why EURJPY is so high and why, despite an endless stream of disappointingly near-record-bad macro and micro data in Spain and Italy, yields are near record lows... wonder no more. As Reuters' Jamie McGeever reports, the Japanese bought Spanish and Italian government debt at the fastest pace in 5 years. As Abe increases his militaristic presence in Asia, perhaps his 'promise' to buy any and all European peripheral debt is just the handshake he needs to pressure China (through its largest export market).
... the most effective alpha-generating investment strategies are parasites. An alpha-generating strategy of the type I’m describing uses the market itself as its habitat. It’s not an investment strategy based on the fundamentals of this company or that company – the equivalent of a geographic habitat – but on the behaviors of market participants who are living their investment lives in that fundamentally-derived habitat. A parasitic strategy isn’t the only way to generate alpha – you can also be better suited for a particular investment environment (think warm-blooded animal versus cold-blooded animal as you go into an Ice Age) and generate alpha that way – but I believe that the investment strategies with the largest and most consistent “edge” are, in a very real sense, parasites.
The 1,582-page (apparently bipartisan) omnibus spending bill announced last night adds up to a cool $1.1 trillion. As Bloomberg reports, lawmakers notes "not everyone will like everything in this bill," and we can see why. There is no IMF funding, nothing that "blocks Obamacare," the IRS gets a reprimand - barring them from targetng groups based on their ideological beliefs, preserves language that blocks Federal funding for abortions and spending any money to legalize marijuana. But, perhaps the most critical aspect of the bill is the NSA is required to give Congress number of phone records collected, reviewed during last 5 yrs, including estimate for records of U.S. citizens (among other things). Will that be one step too far for the administration?
Stocks may be masquerading as a big bounce today, driven by a VIX slam which has gotten the algos to ramp the S&P higher and of course a perfectly innocuous gold slam which as usual took out the entire bid stack, but the real money is furiously going elsewhere, such as today's 4 Week auction. Two things were notable: first - the rate was a solid 0.000%. This is not that surprising: after all under ZIRP, and as long as the Fed has control and the USD is the reserve currency, ultra-short term maturities are cash equivalent, which is why investors don't mind getting zero return in exchange for 1 month maturities. However, what was far more notable is that the Bid to Cover in today's auction just soared to 6.36x, highest than last week's 5.66x, and the highest since December of 2011, when the scramble into short-term paper was a function of year end window dressing (made since unncessary courtesy of the Fed's Reverse Repo facility). So while algos are levitating stocks higher based on simple carry currency/VIX correlations, why the sudden real money scramble for the safety of near-term paper?
It would appear that in order to appease the masses - despite his recent small bump in popularity post-Affair - France's President Hollande has gone full Socialist-tard. Aside from promises to cut spending by EUR50 billion in the next 3 years (so less taxes?), Hollande has suggested...
- FRANCE'S HOLLANDE SAYS FRANCE MUST PRODUCE "MORE AND BETTER"
- HOLLANDE SAYS COMPANIES WILL IN RETURN BE GIVEN QUANTITATIVE TARGETS FOR HIRING, TRAINING
- HOLLANDE SAYS PUBLIC SPENDING CUTS CAN BE MADE WHILE PRESERVING FRENCH SOCIAL MODEL
Channeling Stalin, he further calls for "more economic governance of the Euro-zone" and the creation of a Franco-German energy company and more tax-harmonization with the Germans. We are sure Merkel will be over-the-moon at that suggestion.